Should subscription-based SaaS solutions be a CAPEX or an OPEX decision making DOA?

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Should subscription-based SaaS solutions be a CAPEX or an OPEX decision making DOA?

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By: Rajendra Mishra| Managing Director @ procurEngine 12th Mar 2024

In one of my earlier roles as a Business Head during the annual budget approval process I learnt one of the simplest yet a profound insight which I have always used in the businesses that I ran and today I am evangelizing all the decision seekers for a major hurdle faced by them, a bottleneck, a discouragement to the improvement/ transformation/ digitalization projects. During the captioned budget approval meeting all the regular items of cost were debated till there was very little time left in the meeting. When the budget for the improvement projects was put up, the boss said that these do not budgetary approval since they are all value creating initiatives measurable in terms of economic benefits and hence are SELF funded in nature. I wasn’t sure then whether boss really meant it or was generally a trick to get over with the meeting after an exhausting exercise on the main budget ( all too familiar, done many times) being complete, the mind space and seriousness for transformational /improvement projects not there. Ever since if I was convinced on the improvement project ( most of them were genuine and good projects), I would clear the budget for the improvement projects on the logic of Self- funding. I would hedge my bets on a pilot first and then large scale roll out. The projects were huge success most of the times and failed once in a while where we would cut the loss at an early stage. The value creation thro’ this exercise has been multiple of the PAT without the improvement projects. Today we sell our popular platform “procurEngine” to a large number of B2B clients and often encounter the similar behavior i.e. a conventional budgetary approval process where the Finance guy ( I have nothing against them-it is their training) account only the costs and do not recognize the value ( since it will accrue on usage) and do not clear the project which has several hundred percent ROI. To overcome this we offer FOC trial period to the procurement team and without loss of generalization most of the trials have yielded savings ( over and above the conventional process) in excess of the subscription cost for a year. This is moving the needle and we now find faster clearances ( the Finance guy now has a benefit accrued for his metric).

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